Transcript Bank of England Inflation Report May 2008

Inflation Report
May 2008
Output and supply
Chart 3.1 GDP at market prices(a)
Sources: ONS and Bank calculations.
(a) Chained-volume measures. The fan chart depicts an estimated probability distribution for GDP growth over the past. It can be interpreted in the same way as the fan charts in
Section 5 and forms the first part of the fan chart shown in Chart 5.1 on page 39. For more information, see Cunningham, A and Jeffery, C (2007), ‘Extracting a better signal from uncertain data’,
Bank of England Quarterly Bulletin, Vol. 47, No. 3, pages 364–75. When calculating growth rates, the level of output prior to 2003 is set to equal the ONS data. The post-1998 average is
calculated using the latest ONS data.
Chart 3.2 Contributions to four-quarter service sector output
growth(a)
(a) Chained-volume measures. Figures in parentheses are shares in services in 2003. The bars in the chart do not sum precisely to total services growth because of rounding differences.
Chart 3.3 Indicators of service sector output growth
Sources: CBI/Grant Thornton, CBI/PwC and CIPS/NTC.
(a) Percentage balances of respondents expecting volume of output/business to be ‘up’ relative to ‘down’ over the next three months.
(b) Deviations from average since 1998 Q4.
(c) Based on quarterly averages of the new orders index. The question asks whether orders are higher or lower relative to the situation one month ago. The diamond is based on the monthly
outturn for April.
Chart 3.4 Indicators of changes in backlogs of work(a)
Source: CIPS/NTC.
(a) The question asks whether the level of backlogs/outstanding business is higher or lower relative to the situation one month ago. Three-month moving averages.
(b) Differences from average since November 1999.
Chart 3.5 Indicators of construction sector output
Sources: Bank of England, CIPS/NTC, Experian and ONS.
(a) The swathe consists of: quarterly averages of the Experian construction activity index and the CIPS/NTC construction activity balance; and the end-quarter Agents’ score for construction
sector output.
Chart 3.6 Measures of capacity utilisation(a)
Sources: Bank of England, BCC, CBI, CBI/Grant Thornton, CBI/PwC and ONS.
(a) Three measures are produced by weighting together surveys from the Bank’s regional Agents (manufacturing, services), the BCC (manufacturing, services), and the CBI (manufacturing, financial
services, business/consumer services, distributive trades), using nominal shares in value added. The BCC data are non seasonally adjusted.
Chart 3.7 Private sector capital services and business investment
Sources: ONS and Bank calculations.
(a) See Oulton, N and Srinivasan, S (2003), ‘Capital stocks, capital services, and depreciation: an integrated framework’, Bank of England Working Paper no. 192 for more information on how
the capital services data are constructed.
Chart 3.8 Contributions to annual employment growth(a)
Source: ONS (including Labour Force Survey).
(a) Public sector employment data have been adjusted to be on a calendar-quarter basis. The diamond shows annual employment growth in the three months to February.
Chart 3.9 Contributions to annual growth in total hours worked(a)
Source: Labour Force Survey.
(a) Three-month moving average measures. Average hours are defined as total hours worked divided by LFS employment.
Chart 3.10 Output, labour productivity and employment(a)
Sources: ONS (including Labour Force Survey) and Bank calculations.
(a) Labour productivity defined as GDP divided by total LFS employment. Diamonds for employment and productivity in 2008 Q1 are based on employment in the three months to February and
Q1 GDP.
(b) Chained-volume measure, at market prices.
Chart 3.11 Changes in surveys of employment intentions since
September 2007
Sources: Bank of England, BCC, CBI, CBI/Grant Thornton, CBI/PwC, Experian, Manpower and ONS (including Labour Force Survey).
(a) Consumer, business and professional services. Average since 1998 Q4.
(b) Manufacturing and services measures weighted together using employment shares. The BCC data are non seasonally adjusted.
(c) The Agents’ scores refer to companies’ employment intentions over the next six months.
Tables
Table 3.A Comparison of selected economic indicators in the
United Kingdom and Poland
GDP growth (per cent)(a)
United Kingdom
Poland
Unemployment rate (per cent)(b)
United Kingdom
Poland
Wage growth (per cent)(c)
United Kingdom
Poland
Polish wages as a percentage
of UK wages(d)
Zloty per pound(e)
2004
2005
2006
2007
2008
3.3
5.3
1.8
3.6
2.9
6.2
3.0
6.5
2.5
n.a.
4.7
19.0
4.8
17.7
5.3
13.8
5.3
9.6
5.2
8.0
5.2
3.9
5.9
5.3
5.3
7.1
4.3
14.4
3.7
n.a.
15.9
17.7
18.1
19.8
n.a.
6.7
5.9
5.7
5.5
4.6
Sources: Bank of England, Eurostat and ONS (including Labour Force Survey).
(a) At market prices. The UK 2008 observation is based on four-quarter growth in 2008 Q1.
(b) Based on Eurostat data. The UK 2008 observation is based on the unemployment rate in the three months to February. The Polish 2008 data are based on the unemployment rate
in the three months to March.
(c) Compensation of employees. The UK observation for 2008 is based on annual growth in the private sector average earnings index in the three months to February.
(d) Calculated using market exchange rates.
(e) Annual averages. 2008 observation based on average to 7 May.
Table 3.B Selected indicators of labour market pressure(a)
Average
2007
1998–2006
Q4
Jan.
Feb.
Mar.
LFS unemployment rate(b)
5.3
5.3
5.2
5.2
n.a.
Claimant count(c)
3.3
2.5
2.5
2.5
2.5
Weighted non-employment rate(d)
7.0
7.6
7.6
7.5
n.a.
0.40
0.41
0.42
0.42
n.a.
1.7
1.0
0.9
0.6
0.3
Vacancies/unemployed ratio(e)
Recruitment difficulties(f)
2008
Sources: Bank of England, ONS (including Labour Force Survey) and Bank calculations.
(a)
(b)
(c)
(d)
Based on three-month moving average measures, unless otherwise stated.
Percentage of the economically active population.
Percentage of the sum of the claimant count and Workforce Jobs, monthly data.
Percentage of the working-age population. This measure weights together the different types of non-employed by a proxy of their likelihood of finding work based on transition rates into
employment derived from the Labour Force Survey (LFS). Weights are backward-looking four-quarter moving averages of the quarterly transition rates of each group into employment.
(e) The vacancies/unemployed ratio is calculated as the number of job vacancies divided by the LFS measure of unemployment. Vacancies exclude agriculture, forestry and fishing. Average is
since June 2001.
(f) Agents’ scores for recruitment difficulties in the most recent three months compared with the situation a year earlier.
The impact of the dislocation
in financial markets on
potential supply
Chart A Estimated contributions to annual GDP growth(a)
Sources: ONS (including Labour Force Survey) and Bank calculations.
(a) Chained-volume measure. The decomposition is based on total hours worked, whole-economy capital services and the latest vintage of ONS GDP growth estimates. The estimated
contributions of capital and labour are based on a Cobb-Douglas production function, with constant income shares of labour and capital (0.7 and 0.3 respectively).